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About Loan

A loan is a type of [debt]. All material things can be lent but this article focuses exclusively on monetary loans. Like all debt instruments, a loan entails the redistribution of financial [asset]s over time, between the [wiktionary:lender] and the [wiktionary:borrower].

The borrower initially receives an amount of [money] from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as [interest] on the [debt]. A borrower may be subject to certain restrictions known as [loan covenant]s under the terms of the loan.

Acting as a provider of loans is one of the principal tasks for [financial institution]s. For other institutions, issuing of [debt] contracts such as [bond (finance)] is a typical source of funding. Bank loans and credit are one way to increase the [money supply].

Legally, a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of money.

Types Secured A [mortgage loan] is a very common type of debt instrument, used by many individuals to purchase [housing]. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security - a [lien] on the title to the house - until the mortgage is paid off in full. If the borrower [Default (finance)] on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.

In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter - often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.

A type of loan especially used in [limited partnership] agreements is the [recourse note].

Unsecured These may be available from financial institutions under many different guises or marketing packages:

[credit card] debt,
personal loans,
[bank] [overdraft]s
credit facilities or lines of credit
[corporate bond]s

The [interest rate]s applicable to these different forms may vary depending on the lender, the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the [Consumer Credit Act 1974].

Abuses [Predatory lending] is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorised, it could be considered a [loan shark].

[Usury] is a different form of abuse, charging excessive interest. In different time periods and cultures the acceptable interest rate has varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organisations of lending at usurious interest rates and making money out of frivolous "extra charges" Credit card holders pay Rs 6,000 cr 'extra' [May 03], [2007]

Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with an intent to defraud the lender.

See also

[Finance], [Personal finance], [Settlement (finance)]
[Debt], [Consumer debt], [Debt consolidation], [Government debt]
[Bank], [Fractional-reserve banking], [Building society]
[FAFSA]
[George D. Sax] and the Exchange National Bank of Chicago - Innovation of instant loans
[Annual percentage rate] (a.k.a. [Effective annual rate])
[Interest-only loan]
[Student loan]
[Payday loan]
[Refund Anticipation Loan]
[Federal student loan consolidation]
[Federal Perkins Loan]
[Stafford loan]
[Title loan]
[Syndicated loan]

References

Information Reference: Wikipedia.org

Loan

Questions and Answers

How much is the maximum student loan I could be entitled to in April?

Q) I get my next loan on the 7th of April. What is the maximum loan amount that can be issued?

A) There are so many uses for old secured personal loans, and the chances are you will be able to get one quickly and easily. It's a common idea that only homeowners can get loans from finance companies. That just isn't true, most people can apply for, and receive an unsecured personal all kinds of uses. You can get loans from a few hundred pounds, up to £25,000, unsecured. These loans can be used to buy a new car, a holiday abroad, a new kitchen, the latest cell phone available, or just about anythingday loan, and some companies let you apply online. The interest rate you pay will be made very clear to by the broker before you sign anything. As will the amount of the monthly payment, and how long you have to make those payments for. Any quality broker will go out of his way to make sure you understand these rules.

What is the loan company called that has been advertised on tv?

Q) It says you can get a decision asap and even possibly pay the loan into your account on same day?

A) Be very careful. These companies charge high interest rates, the advertised rate is 'typical'. A friend of mine applied to one that was advertising a rate of 6.5%, but the quote he got was 12.5%. Anycompany that says 'combine all your outgoings into one loan' and then adds 'and have enough left over for a new car or a holiday' should be avoided at all costs. How can borrowing more get you out of debt?

What will happen to student loan repayments if there is a recession?

Q) If you have a UK student loan which is taken directly from your salary and is linked to the rate of inflation, what is likely to happen if there is a recession, and the knock-on effects this would have? Can anyone enlighten me?

A) As the student loans company work out the rate of inflation each year as defined by the retail prices index it changes annually and you are informed of this in your statement (at the moment it's around 2.4%) Therefore this could rise or fall depending on the yearly situation, normally not by very much, however a recession could cause a more significant change. Of course you only pay back 9% of any earnings you have over £15,000 regardless of the debt you have and the interest applied so your payments themselves won't change. All as that will happen is the yearly interest applied to your account will be higher or lower.

How do I get a loan to purchase the lease hold of a public house?

Q) I used to be in the licenced trade about 10 years ago and want to get my own pub now instead of just management. Does anyone know of a company I can see to get a loan. I have nothing to put down as a deposit and I have a few (small) CCJ'S. Is there a company understanding enough out there to help me. Thanks for looking in.

A) ask the brewery who own it? you might be suprised,

What is the difference between an unsecured and secured loan?

Q) I'm thinking of getting a loan but then the question comes up as to whether I want a secured or unsecured loan? WHats the difference and which ine is more advisable to take?

A) Secured loan is a loan secured against something, eg your house, in case you can't pay it back. Unsecured is better if you can get it.

What companies can offer an unsecured loan-with bad credit?

Q) I currently have a debt of £4,000. I have really racked my brains of how to raise this type of finance to consilidate and pay off my debts! Having applied to Norwich & Peterborough and being refused due to a low credit score. Can anybody please recommend any loan companies that would be able to help!? Thanks.

A) 4k is nothin in the debt world, & take my advice make an offer to pay it back say £20 a month DONT get a loan, ur askin 4 trouble.

Is it possible to combine my personal loan with a mortgage?

Q) I have a personal loan with the bank for £15,000. I want to get a property, but I know I won't be able to get a mortgage and pay the loan at the same time. I therefore wondered if it would be possible to incorporatre the loan into the mortage, so I basically add £15000 onto the mortgage. What do you think?

A) you can get a loan to run along side it but i guess if you could remortgage and pay off the loan ask at the bank for best way to do it

How can I get a loan when I have just lived in the UK for 10 months?

Q) Because of work and changing my flat, I am no in desperately need of a loan for a car and deposit money. But because I have only lived in the UK for 10 months, no one will give me a loan. I need around £3-4000. Is it anyonw who knows somewhere or someone that can help?? Thank You for all serious answers.

A) Approach your bank, the one you have an account with.

What is the process for applying for a graduate loan?

Q) I am graduating this year and was wondering how to go about applying for a graduate loan (UK only). Am I able to apply as soon as I've finished my finals or does it have to be after my actual graduation ceremony? And what APR can I expect to pay?

A) Uk may be different from US.....Talk to your college adviser or financial aid office.

Any advice on getting a business loan for a start up?

Q) I have been working on my business plan and i am almost all set. But now i am worried about trying to get a bank loan. I quit my job because i wanted to concentrate on my business and because it wasnt for me. But now i have no income and no real assets. I am only 24 and have no real savings or anything. Will banks even concider me for a loan even though my business plan is really good?

A) The first question is how much capital do you need before you reach positive cashflow? If it is very small, I would look to relatives/friends to invest or even possibly use a credit card. Banks generally don't make loans against business plans since there are no real assets as collateral. Furthermore, there is no cashflow from a going concern to support debt repayment so the anticipation of being repaid is essentially 0 (from the banks perspective). Banks are not really in the business of assessing business plans. What you are looking for is venture capital, but more specifically seed money. I would start looking for wealthy relatives and friends. Sometimes entrepreneurs leverage up with credit cards to get things going. You should have your plan reviewed by several people who know business. You can also start sending it to venture capitalists.

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What loan companies will give you a loan for a motorcycle if your credit is really bad?

Q) I helped an ex get a motorcycle and now need him to repay me. He needs to take out a loan and repay me or buy the bike from me. His credit is horrible but there has to be places that will still give you a loan. Please help me with advice!

A) All I can say is, if you own the motorcycle, take it back. If he does, tell him to get a title loan. He can make payments but depends on what he still owes you.

Can I take out a home loan for land and a manufactured loan?

Q) By home loan I mean a home loan and not a personal property loan like on a trailer home/manufactured home in a trailer court. I qualified for a home loan and I want to keep it cheap, so I want to purchase a piece of land and a manufactured home. Wil this work as a home loan if its on private land? Wow, there is quite the array of scams out there! Why would anyone take out a loan from the internet without talking to someone face to face?

A) To have a mortgage loan you must have land involved, so no trailer park rentals. Lender's are not fond of mobile homes because they lose value - unlike a stick-built home which will appreciate in value. You are unlikely to find 100% financing for a mobile home. 90% or less is the norm and that is with good credit. Your interest rate will be higher as well. If you are buying this as an investment (in your own future-not as an investment property) you should look into a modular home. Anything but a mobile. You won't get out what you put into a mobile. That said, there are some very nice mobile homes out there.

Is student loan still tax deductable when refinancing a student loan with a personal loan?

Q) My daughter has two very high interest student loans. Her credit won't let her do anything, but I can "refinance" it with me getting the loan using my credit. But is it still a "student" loan that she can deduct. She is making the payments and her name will be also on the loan (ironically, she will co-sign for me). This seems to be some gray area once the loan gets moved around. Just want to make sure the "chain of custody" still makes the new loan interest tax deductable. Hope this made sense and thanks for your help.

A) Nope, sorry, but personal loan won't qualify, as you will have nothing in writing to say that it is student loan interest.

What is the best student loan and how to get it?

Q) What's a perkin's loan? What's a direct loan? Private loan? I don't understand the whole process! What loan would have the lowest interest rate and is best overall? I will be attending University of California Santa Cruz. I don't know where to begin with the whole loan process. I currently have no credit history, etc. Help?

A) Congratulations on deciding to attend college at UCSC, my relatives live in the area of the University and I've heard it is really quite a school! When it comes to Student Loans there are two options that you could pursue, Federal Student Loans and Private Student Loans. Federal Student Loans come in two different forms, the Federal Stafford Loan and the Federal Perkins Loan. The Federal Stafford Loan is split into a Subsidized and an Unsubsidized Loan issued at a 6.8% interest rate. The Federal Perkins Loan is issued at a 5% interest rate and the school you are attending is the Lender. All of these types of loans are need based not credit based; you must fill out the FAFSA form in order to see how much you qualify for. Private Student Loans are credit based loans; these are usually serviced by the Lender, meaning you are responsible for paying the company you applied for the loan with back. For more information on Federal Student Loans and the difference between Subsidized and Unsubsidized Loans please visit the source below. I hope this helped shed a little light on the subject for you. Good luck!

If I consolidate my student loan with a personal loan can I still write off the interest?

Q) I had a federal student loan which I consolidated about 8 years ago to someone who eventually sold that loan to Citibank. I pay about 8.35% in interest. I am considering paying off that student loan with a personal loan where I can get a better interest rate. If I do this will I still be able to write off the interest I pay on my taxes?

A) Nope. It will no longer be a student loan then. You may be able to consolidate several student loans into another student loan at a better rate, but if you pay it off with a personal loan you'll be left with a non-deductible personal loan.

How does a home equity loan work?

Q) I need to know all the details and if it is a good choice. I have payed off my vehicle and credit cards and have none, but I have alot of student loan debt. Our dilema are the student loans. And paying them. I have heard about home equity loans and heard about being tax deductible. How do they work? Do they look bad on your credit? How much can you borrow ? Does it add to the years to pay off your house? We only have eleven years left to pay as it is right now. Just wondering what is a good option. I even thought that after I graduate and am working that my pay checks can go all to my student loans. I am just looking for some good ideas without having to stress out about debt and bills and such. We are trying to pay our bills off and so far have done good. But those student loans are looming in the background.

A) I'm not sure why you would want to get a home equity loan to pay off student loans. Typically interest rates on student loans are much lower than home equity loans. It is true that you can use interest paid on a home equity loan as a tax deduction, but you can also use interest paid on student loans as a deduction.

How exactly do 'interest only' mortgage loans work? When do I pay on the principle of such a loan?

Q) I know APR loans are a bad idea, but how would an interest-only loan work? Would it still be a 30 year note, or do they extend the loan? Would I be able to get a fixed rate with an interest-only mortgage loan?

A) In an interest-only loan or mortgage the borrower only pays interest each month. This makes it cheaper than a conventional mortgage, in which part of each month's payment goes towards the principal and part goes towards interest. These loans have become popular because the monthly payments are lower, allowing borrowers to afford a larger home. However, these loans can be dangerous, especially in a down housing market. The interest rates are generally fixed for the first 1, 3 or 5 years. After that, they convert to a conventional loan, with a higher monthly payment. Most borrowers take on these loans because they assume they will sell the home before the interest rate increases. In a down market, they may not be able to sell. If they cannot afford the increased payment, they may have to default on the loan, and foreclose on the home. So, when the rate starts to adjust, you would need to refinance again. And, either get a fixed or another interest only adjustable. And, yes, I do believe you mean ARM. Although, if you have extra money every so often, you can pay down the principal in extra payments.

What student loan company has the lowest interest rate?

Q) I currently have a nelly mae loan(sallie mae) and they are way too high. Whats a good loan company for me to look at for next school year? PLEASE ONLY ANSWER IF YOU ACTUALLY HAVE TAKEN OUT A LOAN WITH THE PLACES YOU RECOMMEND.

A) Federal loans are regulated by the government so all the rates are the same no matter what bank you take the loan from. Perkins loans are 5%. Stafford Loans are 6.8% and some of them the government pays the interest while you are in school. I'd stay away from any Private student loans, they are EVIL! Good luck

How long is the loan process when buying a house?

Q) I found a house, got a loan approved, made an offer, got the inspection done and the loan company had the apprisal done. Now however my mortgage loan officer said my info was with the underwriters and would let me know of the final approval. Could my loan still be denied?

A) Usually it is around a month maybe a little less depending on how busy the market is. Essentially the only thing that could keep you from getting the loan is having the house appraise for less than the selling price. Otherwise you already got approved for the loan in the amount you made the offer for, so that should be an issue. Unless you ran up some debt that through your debt to income ratio out of whack. You should be O.K. Usually it takes a few weeks to get the loan written up and things finalized. Plus when did you specify to close, if you chose to close at the begining of February then that is probably why they aren't done yet. I just locked in my refinance, (which will take less time) I think we'll get that closed in 3 weeks. 15yr @ 4.625% Good credit is always a help.

Does a student loan and a bank loan affect your credit the same way?

Q) I have one credit card ( revolving credit ) and I have one student loan ( fixed monthly payments ). I want to keep one revolving account and one fixed account. Would a bank loan that pays off the student loan look better as a fixed loan? I guess my question is: Do they both count as fixed loans or is the bank loan a more "authentic" fixed loan?

A) doesnt matter....they're both 'installment' loans on your credit report. i wouldnt take a bank loan because MOST LIKELY the interest isnt tax deductible like the student loan. i would advise to have 2-3 credits...2 installment loans....can be student loan, auto loan or other loan...and a MORTGAGE! make sure you keep low balances are on revolving accounts...and you should be go to go.